Mexico’s lack of funds to pay for damages caused by hurricanes that struck both of its coasts this month is credit negative as states try to rebuild roads, bridges and houses, Moody’s Investors Service said. Reconstruction of cities devastated by hurricanes Ingrid and Manuel would require 16 billion pesos ($1.2 billion) to 48 billion pesos, according to a report e-mailed today by Moody’s. The federal government has about 13 billion pesos set aside for disaster relief , Finance Minister Luis Videgaray said yesterday. The twin hurricanes left at least 139 dead, shut down the highway from Mexico City to Acapulco for a week and forced 60,000 people from their homes. Videgaray said he’ll probably ask lawmakers to change his 2014 budget proposal to increase recovery aid. The credit negative factor applies to at least 12 states hardest hit by the storms that have ratings ranging from Veracruz’s Ba3 to Tamaulipas’s Baa3, Moody’s Associate Analyst Rafael Rodriguez said in an e-mailed response to questions. The hurricanes “negatively pressure the finances of at least 12 Mexican states, a credit negative factor,” Moody’s wrote in its report. “Even if available federal funds are sufficient in the short term to cover damages, a long and complex allocation process could force states to cover some part of the reconstruction costs.” The peso fell 0.7 percent to 13.0989 at 1:19 p.m. in Mexico City, weakening after Moody’s report. The yield on peso-denominated government bonds due in 2024 rose 7 basis points, or 0.07 percentage point, to 6.05 percent. ‘Negative Factor’ “Today we’ve seen a sale in the market because of comments about Moody’s related to the fact that the storm situation could be a credit negative factor,” Alejandro Padilla, a strategist at Grupo Financiero Banorte SAB, said in an e-mailed response to questions. “The reaction in both the bond and exchange rate are due to this topic.” Padilla added the market has also reacted to the government’s announcement it will sell more debt in the fourth quarter. The Finance Ministry released a statement today disclosing its bond-selling program for the last three months of the year.
Posted on: Fri, 27 Sep 2013 02:58:26 +0000
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